How Trump’s Administration May Affect Payments Policies
- The Payments industry is anxious to see changes Trump will bring
- The CFPB may narrow its scope
- Will Trump address paper checks?
The election of Donald Trump as President will have a significant impact on the payments industry, reports Payments Dive. His administration will have the opportunity to revamp federal government approaches to emerging payments technologies and services.
With payments processes caught up in rapid change, new laws and regulatory policies put forward by his administration will be influential, for better or worse, in creating a climate in which new digital payments and cryptocurrency schemes will develop. His administration will also be referees for the environment in which new fintechs, such as Stripe and Block, take on larger legacy companies, like Visa and Amazon.
One key area is the Consumer Financial Protection Bureau (CFPB), which has taken an aggressive stance on regulating new digital payments tools under the Biden administration. Trump is likely to appoint a CFPB director who will take a less aggressive approach, potentially reversing recent CFPB rules on buy-now-pay-later financing and earned wage access.
A Narrower Scope for the CFPB?
The administration may also weaken the CFPB by not replacing retiring personnel, reducing its resources and enforcement capabilities. This could leave consumers more vulnerable to "scams and fraud and deceptive practices," according to experts.
Trump probably can’t just dissolve the CFPB, without being provided that authority by Congress, but he can have it “focus on different things, or take out all its teeth,” said John Diamond, director of the Center for Public Finance at Rice University’s Baker Institute.
However, according to Adam Rust, director of financial services for the Consumer Federation of America:
“Whoever will be leading the CFPB in a Trump administration will not be looking to take the expansive view of powers and obligations and jurisdiction that has seemingly been the case under the Biden administration,” said Chris Daniel, who is chair of the law firm Paul Hastings global fintech and payments group.
Mergers and Aquisitions
According to MarketWatch, Trump is expected to make changes to the Comptroller of the Currency and the director of the CFPB -- both of whom sit on the five-member board of the directors of the FDIC. With Republicans holding the Senate, this could mean big moves when it comes to M&A activity for financial institutions:
Merger-related euphoria was evident on Wednesday following Trump’s clear victory. Shares of Capital One Financial Corp. and Discover Financial Services and Discover Financial Services were up 15% and 20% that day, respectively, with investors expecting the banks now to be on a smoother path toward regulatory approval for their merger.
Marinac wrote that the shift in regulatory policy may not have a great affect on banks’ costs. He believes a greater benefit from regulatory changes would be “M&A deals that are more likely to close with less regulation and roadblocks than in the prior few years.”
Credit Cards
On the credit card front, there appears to be similar sentiment with the previous administration. The CFOB finalized a rule that sets a $8 limit for late fees that can be imposed by large credit card issuers, and eliminates automatic inflation increases.
Trump has proposed a temporary 10% interest rate cap, which could find common ground with the CFPB's crackdown on "junk fees." The administration may also breathe new life into the Credit Card Competition Act, which would force banks to offer networks other than Visa and Mastercard.
Cryptocurrency
Perhaps nothing has gained more media attention than cryptocurrency. In his first term, Trump viewed cryptocurrencies as a "scam," but has since shifted. This is evident with his pro-cryptocurrency messaging and the appointment of Elon Musk to lead the newly established Department Government Efficiency (DOGE) along with Vivek Ramaswamy. For those who have invested in cryptocurrency or follow Elon Musk, they are familiar with his infatuation with the meme coin Doge Coin; there is no coincidence in the naming of this new department.
What is most likely to occur is passing of the Financial Innovation and Technology for the 21st Century Act, which stalled in the Democrat-controlled Senate during the previous administration.
The bill calls for regulating digital assets like a commodity if they operate on a decentralized blockchain, or digital ledger, handing it to the less prescriptive Commmodity Futures Trading Commission for regulation, as opposed to the more restrictive Securities and Exchange Commission.
On an adjacent front, Republicans have steadfastly opposed the creation of a central bank digital currency, and that is likely to be the stance of the incoming administration as private interests flood in to offer solutions, Angel said. The election of Trump not only gave a boost to cryptocurrencies, it lifted the value of the stablecoin USD Coin, he noted.
Will Trump Address Paper Checks?
It remains to be seen if Trump's administration will take a look at legacy payments like checks. During the previous administration, we saw bi-partisan cooperation on bills addressing the mail theft and mail carrier issues. However, this does not mean that Trump's administration will address any particular legacy payment, though we may be able to gather insights as Trump continues to select more candidates for his cabinets.
Financial institutions will see many changes in the next four years. What should not change is their commitment to investing in technologies that create efficiencies for legacy payments like checks, while also servicing their customers.